Answer to Question #316590 in Management for priya

Question

. Plyway manufactures and sells wooden chairs. The chief accountant of the entity is contemplating whether to follow marginal costing or absorption costing for preparing the profit statement. Explain any three advantages of marginal as well absorption costing to the chief accountant. Also, try to bring out three differences between marginal and absorption costing to make the choice easy for the chief accountant. If the chief accountant is preparing the profit statement for internal, decision-making purpose, which of the two methods should she follow? 

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Answer 1

As a result, neither cost nor profit are tainted. Comparisons of costs become increasingly useful. (iii) The technique produces data that may be used to make managerial decisions. (iv) There is no concern with overhead absorption being too high or too low.